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Dollar plummets, bonds mixed
Greenback slides to new 4-year low against the euro, bonds tread lower after 10-year note auction.
May 8, 2003: 8:09 PM EDT

NEW YORK (CNN/Money) - The euro surged on Thursday, breaking above the $1.15 level and marking a fresh four-year high, driven by broader strength against the yen, traders said.

In a fairly swift move, the single European currency, introduced on January 1, 2000, hit new peaks at $1.1506 before dipping to 1.1497 around 3:30 p.m. ET. The dollar gained back some of its lost ground against the yen, buying 116.93 compared with 116.46 late Wednesday.

Treasurys wavered as the two-day ran out of steam following a choppy debt auction, but echoes of the Fed's hints at the possibility of further rate cuts kept a floor under prices.

The Treasury sold $18.0 billion in 10-year notes Thursday, comprising the last leg of the government's three-part, record-size $58 billion quarterly refinancing.

At 3:30 p.m. ET, the benchmark 10-year note slid 1/32 of a point in price to 101-17/32, lowering its yield to 3.68 percent from 3.70 percent late Wednesday. The 30-year bond remained unchanged at 110-16/32, yielding 4.65 percent.

The five-year note rose 3/32 of a point to 100-1/32, yielding 2.62 percent. The two-year note fell 3/32 of a point to 100-10/32, yielding 1.47 percent. Yields and prices move in opposite directions.

Demand was scant for the $18 billion auction of 10-year notes, which followed a week of massive supply with $22 billion in 3-year notes and $18 billion in 5-years sold on Tuesday and Wednesday.

"I guess the market had its fill by the time it came around to the 10-years -- we've got a little bit of indigestion," said Gregg Cohen, a trader at CIBC World Markets. "But the market's hanging in there pretty well."

Thursday's sale drew bids worth a meager 1.22 times the amount on offer, well below a bid-to-cover ratio of 1.85 in the last 10-year auction in February.

Two days after Federal Reserve policy makers decided to leave interest rates unchanged, the European Central Bank also chose to hold rates at their current 2.50 percent. The Fed did choose on Tuesday to issue a bias towards easing, citing weak economic conditions.

Traders said that a major reason for the recent run-up in bonds is talk that with little room for the Fed to move lower on interest rates, the central bank may decide to begin buying Treasurys in the open market in order to counter fears of deflation.

Some economists think the Fed is leaning toward easing interest rates by 0.5 percent in June, which would bring the current 1.25 percent Fed funds rate to 0.75 percent. Traders say there is a possibility that the Fed would change its monetary policy and start buying bonds before the interest rate got to zero -- in turn driving investors into Treasurys in the current environment.  Top of page


--from staff and wire reports




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.